We have a new law! The “Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019.” That is a mouthful for sure but it did pass on December 20, 2019 and President Trump signed it into law. The Act includes a number of retirement savings and employee benefit changes. Rather than go into the whole act in this one post…I thought it would be best to focus on one piece at a time. Hence the “pt. #1” of the title.
Pt. # 1
One of the key changes is the modifications to the Required Minimum Distribution (RMD) Rules. That is the age where you are required to start taking money from your traditional IRA’s. The age which was formerly set at age 70 1/2 is increased to age 72. This will be effective and applicable to distributions required to be made after December 31, 2019, with respect to individuals who attain age 70 1/2 after that date. Other plans that also are modified include 401(k), 403(b) and governmental 457 (b) plans.
The RMD rules have also changed for the beneficiaries of IRA’s and defined contribution plans. The new law states that payments to non-spousal beneficiaries must be completed by the 10th calendar year following the year of the participants death. This is regardless of whether RMD’s began before death. This effectively eliminates the “stretch RMD” option often utilized to mitigate the tax effect.